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Treasury

What could go wrong with the yield curve ?New Fed policy will allow inflation to run above its 2% target. To achieve higher inflation the Fed is is expected to hold short-term rates very low for a long time. A sudden steepening of the yield curve after an inversion almost always coincides with recession. Aggressive expansion of the money supply through fiscal and Fed policy has led to concerns of rising inflation. The US government needs to fund relief packages and pump money into a weak economy. Excess supply of longer-dated Treasury supply hitting the market may put additional pressure on prices and keep long dated yields moving higher. Institutions may aim to unload expensive long-term Treasuries onto the market which could depress prices and increase yields. Investors may soon demand higher yields on longer-term debt. But are we ready for higher back-end rates & a steeper curve? The inflation break-even rate between 10 year Treasury Inflation Protected Securities (TIPS) and regular 10 year Treasuries hit 1.8% last month, the highest since February.
TVC:US10Y
by dime
1
30 year Treasury Bond Yield trend change?This will be interesting to keep an eye on over the coming years. If the ending triangle is a wave C diagonal, then it would signal the end of the down-trend in yields over the past 23+ years. Zero fundamental analysis was conducted, but it would seem there is upward pressure on yields at a time that 10 year T bonds is in a corrective phase - down 12+% from 2012 highs. Each wave C of the first two ABC corrections extended ~1:1 but not less. The current ABC has extended slightly more than 0.786 and is displaying a tightening range. If the triangle is a a wave 1 diagonal then this would strongly imply moderate to strong upward pressure on government bonds and a conservative estimate of 44+ is possible. The most plausible bearish scenario would be a downward breakout to around the 1:1 extension of wave A down to the sub 17 range. That would place the triangle in the wave 4 position in wave C down. The next couple of years will illuminate all. Another possibility is a meandering sideways correction instead of a definitive breakout. Yes I am covering my bases; it could go up, down, or sideways :) But I expect a trend change with some strength behind it. I am not an investor in this market. But am sharing this for my own technical analysis education.
TLong
by flyinkiwi10
Uncertainties remain! Dovish statement We just received the 25 basis points rate cut. The market had already priced it in. Powell just released the statement. It seems to be a dovish one . He will start his speech at 2:30pm, where the market will try to understand the possibility of a 4th rate cut in December. The CBOE Fed tool has the 4th cut in December at 26%. We should see the yield curve steepen. ----- Economic reports GDP report was positive/neutral. ADP employment change headlines were good, but analyst are not happy reading into the details.
TVC:TNXShort
by dorfmanmaster
10 Year T Note: Triple Bottom. Major long term Buy Opportunity.The 10 year has rebounded off the major 1M Support this month, making a statement with last week's strong 1W candle. This marked a Triple Top formation on the 1M scale (since 2012) and the trend shift becomes obvious. 1D is trading near overbought territory (RSI = 70.811) pushing the 1W towards neutrality (RSI = 42.781, ADX = 58.406, Highs/Lows = 0.0000), detaching it from its previous bearish levels. We are expecting a major cyclical bullish move in the next 2+ years towards at least 32.00. Shorter term investors should look towards the inner Channel Up (dashed lines) for pivotal sell/ buy entries. ** If you like our free content follow our profile (www.tradingview.com) to get more daily ideas. ** Comments and likes are greatly appreciated.
TLong
by InvestingScope
Gold reserves measured in years of interest on debtThis chart depicts the US gold reserves divided by the interest on debt. The interest on debt is calculated as a proxy by multiplying the 10 year interest rate with the total federal debt. Whether this is accurate or not is not so important as we just want to compare this ratio with its historic values. It is important to note that official US gold reserves have remained unchanged since the closing of the gold window in the early 70's. This metric has risen and fallen quite a bit. First this metric rose during the stagflation of the late 70's. The gold reserve of 262 million ounces hit a high of 222 billion whilst the yield did a first peak to 13.5% with the debt, barely over 900 billion our proxy interest was about 120 billion and thus the gold reserve was almost able to pay it off twice. It is my belief that the rise in gold prices and with it the value of the US gold reserves is what cooled the debt market causing it to revert course into a 4 decade long bull. Interest rates plummeted, federal debt rose faster, and gold also went down in price. At the turn of the century gold found itself trading at 290 dollar, the gold reserve reduced to 76 billion, the US debt grown to close to 6 trillion and the treasury rate reduced but at times peaking to close to 7%, the ratio hit a low of just 0.2 years of interest on debt that could be paid by the gold reserve. The next 11 years were marked with a continuing of the bond bull run whilst also gold rallied to a new all time high. By 2011 and 2012 the ratio hit close to 2 years again thanks to gold trading at 1800 and the yield as low as 1.5%. Since then, rising yields and declining gold prices have hit this ratio back to about the middle range. Technically, not much can be said where we go from here so we'll have to take a look at the fundamentals. While multiplying the 10yr with the debt is a nice workaround to picture the interest on debt by tradingview the real interest on debt is more difficult to compute. The US debt consists of bonds with various denominations running from 30 year bonds to bonds with maturities of less than 1 year. This means that of the 30 year bonds, most have been issued in the 1990's and 2000's and the interest paid on them is the yield of those bond at the time of issuing. In fact the 30 year bonds that are maturing today have been issued exactly 30 years ago with a yield of almost 9%. When they mature, they are rolled over in new bonds that -even if we had a small tick upwards in the last couple of years) - have a significantly lower interest of just over 2%. The same holds for 10 year bonds which 10 years ago had a yield of 3-4% vs 2.6% today. This effect is what caused the actual interest on debt (www.treasurydirect.gov) to not even double from 214 billion/year in 1988 to just 402 billion/year as recent as 2015 whilst the federal debt exploded over 20 fold from 900 billion to 19 trillion dollars. However, all good stories must come to an end and this one is no different. The bond market has been topping out for the better part of a decade now and yields have seen some upward momentum. This has meant that a lot of treasury auctions saw the treasury forced to roll over their 5, 3 and 1 year bonds into new bonds with a higher yield than the old one. Whilst the treasury can steer and man-oeuvre a little bit by opting to sell short term bonds when yields are high and long term bonds when yields are low there is ultimately no escape from market reality. This has become clearly evident from the last prints of interest expenses on debt outstanding that have risen with 9.1% per year for the last 3 years and show now signs of abating with another 8.6% rise for the first five months of this financial year. This is in stark contrast with the 2.36% increase of the previous 27 years. I would venture to guess that if nothing is done on a policy level to tackle the accumulating debt and rock the bond markets gently to sleep once more we will enter a spiral of increased debt issuance met with stable or declining demand which will push up yields which in turn will create the need of issuing more debt. This viscous circle will only end through a spectacular rise in the price of gold. In a previous analysis I had already outlined a possible scenario of the 10 yr yield hitting its magnet level of 7% by 2025. Given the current debt of 22 trillion, which is increasing at 1 trillion a year, it seems likely that by the start of 2025 we will be looking to a national debt in excess of 30 trillion dollar. At a ratio of 1.8 for our gold reserve to interest expense on debt ratio we learn that the US gold reserve should be valued at 3.8 trillion dollars. For this gold would need to rise to at least 14500 dollar. If for some reason the debt markets stay irrational for a very long time before going in overdrive it could very well be that the US ends up with a 50 trillion dollar debt by 2035 when this scenario fully comes to fruition. In such a scenario I see no reason to expect that the 10 yr yield would only stay limited to 7% but could easily hit the 1980 value of 13.5% again. In order to calm the debt markets at these yields and these levels of debt gold would have to rise to about 45000 dollar to repeat the 1980 scenario. Hold on, its going to be a hell of a ride.
FX:XAUUSD
by fatjohn
1
Yield explosionThe yield curve is still in a bear market. Downward trending resistance at 3.1% Once that is broken, it could easily go up to 7% which will act as a magnet due to it being a historical support line (1973-1992) and resistance (1992-2000). This would be disastrous for the US government as interest on debt would rapidly rise. More fundamental reasons of why the yield curve would go up is off course the US debt which is absurdly high. There is no reason for lenders to keep lending at these low yields. Russia stopped doing it and sold all US treasuries, China stopped doing it and now that the babyboomers are retiring they are stopping as a buyer as well. Soon only the fed will be a buyer of these bonds. Long term up is the only way to go for yields and the road is open until 7%. This would cause a panic since the US will have it very difficult to service the debt without creating more bonds, enlarging the supply. Very good news for gold (65% of the monetary reserve of the US) which could be doing extremely well just as it did in the 1970's
TVC:TNX
by fatjohn
Yep, lower mortgage rates for 201910 year yield is dropping with a quickness to match only stock sell-offs. Might be a good time to look at some REITS? Rates look to me like they will decline for the next 2-3 years. Yields hit .382 fib support today and bounced very slightly higher. News of the end of the Gov shut down could provide the catalyst needed to send yields back to .236 level (2.80%), especially if combined with "favorable" "CHINA!" news. Such a bounce will be temporary and yields will continue to drop lower. Zoom out and you can see we're on a 35+ year trend of lowering rates. Next support fib is 2.29 followed by a more significant one at 2.06. Strongest support at 1.75 where we have fib, gann fan and support/resistance trends all converging.
TVC:US10Y
by jdharward
2
Gold shines with falling real yields This chart compares the real yield of 10 year Treasuries (bottom red) to XAUUSD (top). The real yield is the yield that a treasury buyer can expect to earn after inflation (nominal interest rate minus the inflation rate). At a glance there's visibly a strong negative correlation between real rates and the price of gold over time. Research by _Erb and Harvey showed a negative 82% correlation between real interest rates and gold prices from 1997 to 2012 (The Golden Dilemma). The real yield on long term treasuries was over 3% in 2000 and fell to a negative yield in 2012-2013. During this period of time the price of gold gained over 600%. And in reverse from 2012 the real yield increased approximately 1% to 2015, while the price of gold fell almost 40% during this time. Gold is relatively expensive when the real yield on treasuries is high, and relatively cheap when the real yield on treasuries is low. If an investor can gain a high real yield after inflation by holding a 'risk free' treasury, then the opportunity cost of holding gold is comparatively high. This makes gold relatively less attractive since gold pays neither dividend nor interest. Treasury investors lose money during negative interest rates (when inflation is greater than the nominal interest rate). This makes gold more attractive despite having no yield.
ULong
by dime
1